My wife and I didn’t wait too long after our wedding to create a family. We were parents one week before our first anniversary. Our apartment was too small for a third human, so we endeavored to buy a house. Unfortunately, we didn’t have a lot of cash on hand since we moved from Florida to Virginia six weeks before we got married, and we footed most of the bill for the wedding.
However, we were still able to buy a house, though barely in time for the birth. (My wife was on bed rest for the last two months of her pregnancy, so she laid on a mattress while my friends and I loaded and then unloaded a truck.) If you’re also scrounging for down payment, here are some ways you can save and reach that goal.
1. Get help from family. My dad pitched in $10,000 as an advance on my inheritance. When he passes away, I’ll get less money than my sisters, which he thought was the fair way to do it.
2. Buy a fixer-upper that doesn’t need immediate fixing. We bought a house in less-than-pristine condition, which meant we paid less. We then gradually fixed it up, doing most of the work ourselves. Think of it as trading a larger down payment today for expenses that are spread out over the next year or few.
3. Sell your stuff. I have moved a few times in my life, and each time I made $1,000 or more from selling stuff on Craigslist, to colleagues, or at yard sales. Bonus: less stuff to move!
4. Use IRAs. As an adviser for a retirement-planning service, it almost hurts me to type this. But if you are willing to retire later in exchange for a home today, you have options. Taxable distributions from an IRA might be exempt from the pre-59 ½ 10 percent penalty (but not taxes) if you are a “first-time home buyer,” which the IRS defines as someone who “had no present interest in a main home during the 2-year period ending on the date of acquisition of the home.” So you might still be eligible even if you have owned a home previously but not recently. The penalty-free distribution is limited to $10,000 per qualified person (including both spouses if both are “first-time buyers”). Also, contributions to a Roth IRA can be withdrawn any time tax- and penalty-free; however, this doesn’t apply to the growth or a Roth employer-sponsored account. But before you touch any of your IRAs, make sure you know the rules.
5. Sell your body. Participation in medical tests can earn you money or free health care. I know it sounds weird, but it’s how I got my wisdom teeth pulled for free. Visit the CISCRP.org website to search for clinical trials in your area.
6. Get help from your boss. If you are a valued employee, you might be able to ask for a raise or an advance on your bonus or paycheck. You might also ask if you can take a benefit in the form of cash. This can be tricky for employers, since it can mess up their accounting. But it might be worth a shot if you have a good relationship with the purse-strings-that-be. Feel free to play the “we’re having a baby!” card if you work for a family-friendly company.
7. Get help from the government. Some state and local governments offer assistance to younger or lower- to middle-income citizens. Uncle Sam’s FHA also has programs for cash-poor home buyers. But if you are getting a loan that requires a down payment lower than 20 percent of the home’s value, factor in the possible higher long-term costs, such as a higher interest rate and private mortgage insurance.